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Thursday, February 25, 2016

Reduced severance taxes hurting Kentucky coal communities, would do the same in West Virginia

A decline in Central Appalachian coal production has reduced severance taxes in Kentucky and has coal officials in West Virgina asking for a reduction of the severance tax there. Kentucky officials in Kentucky say the fall in severance taxes has negatively impacted coal counties, and West Virginia officials expressed fear that the same will happen in the Mountain State.

Coal-county judge-executives in Kentucky told the House budget committee this week that a reduction in severance-tax dollars going to the state, half of which is rebated to counties according to production, is stretching already tight state and local budgets even further, Anna Bauman reports for the Kentucky Center for Economic Policy. "In 2015, coal severance tax receipts were just 62 percent of what they were at their peak in 2009, and the forecast for the biennium estimates that in 2018, they’ll be down $185 million from 2009 receipts."

Officials said "the consequences of declining funds have included: Layoffs and bans on overtime; shuttered community centers and recycling centers; higher sanitation bills and 911 fees; drastically reduced meals to senior citizens; and federal dollars left on the table due to constrained local funds," Bauman writes. The judges testified that "too little revenue will jeopardize their ability to fulfill state-mandated duties including sanitation, parks, county jails, animal control and fire and rescue." Kentucky has seen coal production drop 54 percent since 2011, according to the Department of Energy Development and Independence.

A study commissioned by the West Virginia Coal Association said "slashing the state’s coal severance tax from 5 percent to 2 percent would save 1,864 jobs," Daniel Tyson reports for The Register Herald in Beckley. "Those numbers include 464 direct coal mining jobs, 345 direct transportation jobs, 490 jobs indirectly in the supply industry and 565 induced jobs created by household spending of wages. ... The report also states the reduction in severance taxes would bring state mining production numbers up to 2013 levels, about $362 million of additional coal output."

"The West Virginia Department of Revenue estimates a 3 percent reduction would ax in excess of $100 million annually from the state’s coffers," Tyson writes. "That is not feasible at a time when the West Virginia is facing a budget shortfall of more than $350 million.
Lalena Price, communication’s director for the department, told Tyson, “At a time when the state is already dealing with financial difficulties, that’s not something we’re able to consider at this time." Local officials were more blunt, saying a reduction of severance taxes would be devastating to the economic outlook.

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